Oil rises to three-week high

Oil rose, closing at a three-week high, after pending US home sales gained more than forecast in March and the dollar decreased against most major currencies, bolstering the appeal of commodities to investors.

Futures climbed 0.4 per cent after the index of pending home purchases rose 4.1 per cent to 101.4, the highest level since April 2010, according to the National Association of Realtors. The median forecast of 43 economists surveyed by Bloomberg News was a 1 per cent rise. The Dollar Index fell for a third day in a row, extending the five-day loss to 0.8 per cent.

There were "some pretty darn good pending home sales data today," said Phil Flynn, an analyst at futures brokerage PFGBest in Chicago. "The dollar is down, which is helping most of the commodities. There seems to be a small return of the risk play to the market."

Crude oil for June delivery rose 43 cents to $US104.55 a barrel on the New York Mercantile Exchange, the highest settlement since April 2. Prices are up 5.8 per cent this year.

Brent oil for June settlement increased 80 cents, or 0.7 per cent, to $US119.92 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract's premium to West Texas Intermediate crude traded in New York was $US15.37, up from $US15 yesterday.

Equities Gain

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Commodities and equities climbed after the release of the home-purchase data. The Standard & Poor's GSCI Index of 24 commodities climbed as much as 0.9 per cent. The S&P 500 Index rose as much as 0.8 per cent.

The dollar declined as much as 0.3 per cent versus the euro. The Dollar Index dropped 0.1 per cent to 78.928, down 3.5 per cent from the 52-week high set in January.

Oil fell as much as 0.3 per cent in early trading as the Labor Department reported that more Americans than forecast filed applications for unemployment benefits last week. Jobless claims fell by 1,000 to 388,000. The median forecast of 48 economists surveyed by Bloomberg called for a drop to 375,000.

"The move higher is perplexing because the economic data cancel each other out," said Kyle Cooper, director of IAF Advisors, a Houston-based consulting firm. "The housing numbers were better than expected, but the jobless numbers were worse."

A Commerce Department report tomorrow may show that US growth slowed in the first quarter, increasing speculation that the Federal Reserve will consider more stimulus, aiding commodity prices. US gross domestic product rose at a 2.5 per cent annual rate in the quarter after advancing 3 per cent in the last quarter of 2011, according to the median forecast of economists surveyed by Bloomberg.

Wien's Prediction

Oil in New York reached $US110.55 on March 1, the highest intraday level since May 4, amid speculation that Western sanctions aimed at halting Iran's nuclear program would disrupt Middle East shipments. Prices have fallen 5.4 per cent from that peak since tension has eased.

The price of oil "is going to go down," Byron Wien, vice chairman of Blackstone Advisory Partners LP, said in an interview with Tom Keene on Bloomberg Television's "Surveillance Midday." More oil will be produced and "the Iran premium is going to come out of the price," he said.

Iranian and Israeli officials offered what may be conciliatory signs this week, easing concern that the flow of oil would be disrupted by a military strike.

Mahmoud-Reza Sajjadi, Iran's envoy to Moscow, yesterday said officials are considering a Russian proposal to avert additional sanctions. In an interview with the Haaretz newspaper, Israel's Army Chief of General Staff Benny Gantz said Iran's leadership is "rational" and won't seek to build a bomb.

Electronic trading volume on the Nymex was 341,250 contracts as of 2:39 p.m. Volume totaled 538,191 contracts yesterday, the fifth straight day under 600,000 and 14 per cent below the three-month average. Open interest was 1.56 million.